Anyone who’s taken on even a small property improvement or maintenance project knows just how challenging and frustrating the process of soliciting bids from vendors can be. Estimates can be all over the board, and some may not even include the scope of service you’re looking for.
To ensure you’re getting quality work for a fair price, you’ll have to do some legwork during the bidding process. Here are some factors to consider when determining how many bids to solicit.
How Many Bids Should HOA Get?
It takes a lot to run a homeowners association. Board members may be in charge, but they can’t do everything on their own. Maintenance, landscaping, snow removal, and construction all require a professional touch.
Hiring the right vendor for the job is crucial. Your board can’t just pick the first option you see or the cheapest one they find. It is important to approach the process with care. This involves securing HOA bids for contract work.
But how many bids should an HOA obtain?
Is 3 the Magic Number?
Generally, we recommend soliciting at least three bids for any given HOA project, but that could vary drastically depending on your project’s scope and complexity. Larger and more complex projects may benefit from a competitive bidding process. For smaller or routine maintenance projects, it’s less critical to collect multiple bids. Before pursuing any type of HOA project, be sure to review your governing documents to verify if there are any requirements in terms of soliciting bids.
Factors That Influence the Number of Bids
There are several practical considerations that can affect how many bids an HOA should ask for.
1. Project Size and Cost
The larger and more expensive the project, the more important competitive bidding becomes. A $2,000 repair, for instance, may not necessarily need a lot of bids compared to a $250,000 capital improvement. Because the latter requires a sizable investment, your board must take extra care in choosing the best possible contractor.
2. Complexity of the Work
The complexity of the job can also influence the number of bids. More technical projects may require contractors with specific licenses, certifications, or experience. If the field is quite narrow, meaning it’s not as prevalent, there may be only a handful of bidders that possess the right qualifications.
3. Market Conditions
If the labor market is tight, contractors may decline an association’s request for a proposal. In such cases, your board may need to contact more vendors just to receive three solid bids. Otherwise, they risk securing only one or two.
4. State Laws and Governing Documents
State laws and the association’s own governing documents should stipulate the HOA bidding procedures, including how many bids to get. Some bylaws, for instance, require a minimum number of bids if the project goes beyond a certain dollar threshold.
Certain states also require competitive bidding for large contracts, especially in condominiums. Florida is an example, under Section 718.3026, which requires competitive bidding for projects that exceed 5 percent of the total annual budget. Illinois does not have a similar requirement.
5. Emergency Situations
In an emergency, you may not have time to gather multiple bids. Most governing documents allow exceptions during times of crisis, such as a burst pipe or a collapsing roof. Because your board must act as fast as possible, waiting for three proposals is unwise as it will delay the repairs.
6. Past Relationships With Contractors
If your association has established positive relationships with reliable contractors in the past, you may choose to work with them again without necessarily seeking multiple bids. That said, the board must ensure that the selection process remains transparent and fair.
7. Quality and Reputation
If there are reputable and highly recommended contractors known for their quality work in your community, you may not need to call up every contractor that shows up on your Google search. The focus should be on selecting a contractor based on their track record and suitability for the project, so long as they fit your budget.
HOA Solicit Bids: Why it Matters
Competitive bidding not only protects you and your association but also ensures a fair and informed decision-making process. Here are the reasons why associations should secure several bids.
- Promotes Financial Responsibility. Comparing bids helps ensure your HOA does not overpay for a certain service or project. It also gives your board an idea of price ranges, which can vary widely for the same scope of work.
- Improves Scope Clarity. When contractors submit proposals, you can easily view the differences in scope. For example, one vendor may include permits or cleanup, while another does not. This side-by-side comparison enables your board to narrow down candidates and clarify expectations.
- Reduces Risk of Conflicts of Interest. Soliciting multiple bids shows a commitment to transparency. It demonstrates to homeowners that your board did not simply award a contract to a friend or preferred vendor without evaluating them first.
- Encourages Better Vendor Performance. Contractors know they are competing when they submit bids. This often results in more detailed proposals, clearer timelines, and stronger warranties.
- Creates a Paper Trail. If an owner questions the decision, your board can show documented comparisons. This supports your board’s fiduciary duty to act in the best interest of the community.
Speaking of fiduciary duty, your board has a duty of care and loyalty to the association as well. This means you must make informed decisions and avoid self-dealing. With competitive bidding, you can support both duties.
When evaluating bids, it’s not a good idea to just choose the lowest bid. That might save your HOA some money, but it can result in poor-quality work or unresponsive vendors, leading to greater liability.
How Many Bids Should an HOA Get? Answered!
At a minimum, your association should obtain at least three solid proposals from vendors. Having three allows you to compare the scope of work, pricing structures, and qualifications before choosing the best possible option.
At First Community Management, we offer full-service management for condo associations throughout the greater Chicago area. This includes assistance with meetings, management and financial aspects of your association. If your board has allocated budget resources for an upcoming repair or maintenance project, we’re here to help solicit bids, prepare a bid summary for the board, and supervise contractors as they complete the work. Contact us today to learn more about all the ways we partner with Illinois HOAs.